Hurricane Ian Shoreline Loss: Four Policies, Oh Joy!
October 19, 2023
The Eleventh Circuit Court of Appeals recently held that the plain text of an insurance policy trumps the parties’ subjective intent and expectations to the contrary, reversing the trial court’s entry of summary judgment. Shiloh Christian Center v. Aspen Specialty Ins. Co., No. 6:20-cv-01774-CEM-LHP, 2023 WL 2920573, at *1 (11th Cir. Apr. 13, 2023).
Hurricanes Matthew and Irma each made landfall upon Melbourne, Florida, peeling back Shiloh Christian Center’s (“the Church”) roof, allowing rain to damage the interior. In 2015, the year before Matthew hit, the Church’s policy with Aspen Specialty Insurance Company (“Aspen”) provided coverage for losses resulting from named windstorms (i.e., hurricanes). Halfway through 2015, the Church asked Aspen to stop covering named-windstorm-related losses and Aspen agreed. To reflect their agreement, Aspen issued an endorsement removing the named windstorm coverage from the policy, reduced the Church’s premium, and refunded its past payments for named-windstorm coverage.
In early 2016, the Church began negotiations to renew its policy and received a quote from Aspen reflecting the same coverage it had after the windstorm exclusion was added. In its application for the 2016 policy, the Church wrote “EX wind” in the section labeled “forms and conditions to apply.” Aspen then issued a binder, which described the agreed-to scope of coverage as “All Risks of Direct Physical Loss or Damage excluding Flood, Earthquake and Named Windstorm.”
Thereafter, Aspen issued the 2016 policy. The cover page described the 2016 policy as a “renewal of” its 2015 predecessor policy. However, the language of these policies differed in a material way: the 2016 policy did not exclude named windstorms, though it contained a detailed accounting of the other policy exclusions.
While the 2016 policy was in force, Hurricane Matthew struck the Church and tore off the roof allowing rainwater to enter the interior. Aspen denied the claim on several grounds, one of which being (you guessed it) the named windstorm exclusion.
Several months later, the Church sought to renew its policy, and again requested on the application of insurance that the policy exclude named windstorms. Aspen issued a binder that reflected the exclusion, but this exclusion did not make it into the 2017 iteration of the policy.
The following year, in true Lemony Snicket fashion, another named windstorm (Hurricane Irma) tore the roof off the Church’s building. Water poured in, exacerbating the prior damage. Aspen, as it had the previous year, denied the Church’s claim for Hurricane Irma damage mainly based upon the Named Windstorm exclusion.
The Church sued Aspen for breach of contract and sought a declaration that the Matthew and Irma policies covered damage from named windstorms. The parties teed up the question of whether the policies provided coverage for the trial court with their respective cross-motions for summary judgment.
The trial court granted summary judgment in favor of Aspen, finding that “no reasonable jury” could find that the parties intended the policies to include coverage for named windstorms based on the overwhelming evidence of the parties’ subjective intent. In reaching this conclusion, the trial court reasoned that Aspen’s evidence of the parties’ intent was overwhelming: “[t]he explicit bargaining to remove named windstorm coverage, the reduced premiums that resulted from that bargaining, and the explicit language in the subsequent policy quotes” all proved that there should not be coverage for named windstorms under either the 2016 or 2017 policy. The Church appealed to the Eleventh Circuit.
On appeal, the Eleventh Circuit held that the 2017 policy unambiguously covers losses from windstorm and, even though the Church admitted that the 2016 policy was ambiguous, it also covers losses from named windstorms based on the guiding principles of policy interpretation.
As the Eleventh Circuit put it, Florida law is “ruthlessly straightforward” when it comes to interpreting unambiguous insurance policies. Where the policy language is plain and unambiguous, the terms of that policy govern. A court must interpret the policy in accordance with the plain meaning to give effect to the policy as written. Importantly, that is true even where extrinsic evidence contradicts the policy’s terms. Consistent with this tenet, Florida law holds that the policy’s terms govern even in a conflict between that and the insurance application, or other evidence of the parties’ subjective intent (no matter how weighty that evidence may be).
Here, the Eleventh Circuit found the terms of the 2017 policy to be unambiguous. The policy contained a provision broadly granting coverage for risks of direct physical loss, and then enumerated exclusions, which unsurprisingly did not include named windstorms. Therefore, the Court held that the 2017 policy unambiguously covered named windstorms. In reaching this conclusion, the Court could not consider the policy application because there was no ambiguity in the policy. Again, where the policy language is in conflict with the application or other evidence of the parties’ subjective intent, the policy governs. The final leg of the Court’s opinion on the 2017 policy rested on the fact that there was an integration clause in the policy, which stated that the parties intended the written agreement to be the entire agreement.
Turning to the 2016 policy, the Church conceded the policy was ambiguous on its face due to conflict between the policy’s broad coverage clause and the Policy’s deductible provision which states, “DEDUCTIBLE: $5,000 Per Occurrence, except; $25,000 Per Occurrence as respects Wind and/or Hail (excluding Named Windstorm).” Because of the deductible provision’s closing parenthetical, there are two reasonable interpretations of the 2016 policy. One could read the closing parenthetical to “exclud[e]” coverage for “Named Windstorm[s]”; or to create a “Named Windstorm” “exclusion” to the $25,000 “exception,” making only named windstorms subject to the $5,000 deductible.
Where, as in this case, an insurance policy is facially ambiguous, Florida law is clear that the ambiguity must be resolved in favor of coverage and against the insurer, without regard to extrinsic evidence of the parties’ supposed intentions or expectations. Therefore, the Court held that the 2016 policy, like the 2017 policy, provided coverage for losses from named windstorms since the ambiguous policy language must be read to provide coverage for named windstorms.
The Shiloh opinion shows why carriers and counsel need to ensure the policy that the parties bargained for matches the final policy issued to the insured. So long as the policy is unambiguous, a court will not consider extrinsic evidence of the parties’ intent or expectations to the contrary and ambiguous policy language will be resolved in favor of coverage.